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VANCOUVER (NEWS 1130) – Controversial plans to tax employee discounts have been put on hold by the federal government, pending a review.

National Revenue Minister Diane Lebouthillier directed the CRA on Wednesday to remove from its website the new wording at the heart of the debate following strong objections from the business community.

“This document was not approved by the minister and we are deeply disappointed that the agency posted something that has been misinterpreted like this,” spokesman John Power wrote in an email Wednesday.

Some industry stakeholders say they’re pleased an internal review and consultations will be done before changes –that could hurt low-level retail workers and heavily burden employers who would be required to track employee benefits– are made.

“Hopefully government’s getting the message enough’s enough,” says Dan Kelly, President and CEO of the Canadian Federation of Independent Business.

“There’s been even more backlash from the small business community, albeit that’s a much smaller group, but hopefully, government is beginning to recognize that some of these tax plans that they have are poorly thought-out.”

Kelly says he’s not all too surprised the federal government seems to be back-tracking.

“I wish they were able to do the same with respect to their proposals to tax small businesses differently, but unfortunately, after months and months of backlash, only recently have they started to ease away from some of their proposals.”

Meanwhile, a government source has told the Canadian Press the CRA has no interest in pursuing smaller benefits obtained, for example, by retail employees who receive discounts on items like clothing because it’s not cost effective for the agency.

The agency’s concern is really about individuals who receive larger, non-monetary benefits that go unreported as income, said the source, who was not authorized to discuss the matter publicly.

One example cited in the CRA’s tax “folio,” which included the updated interpretation, referred to a 2011 Federal Appeal Court ruling on a case involving teachers at a private school. Staff at the school received 50 per cent discounts on tuition fees, which at the time amounted to up to $5,000 a year.

The controversial update to the CRA documents first appeared in a tax folio and was later added to the agency’s employer’s guide.

The change stated that when an employee receives a discount on merchandise because of their employment, “the value of the discount is generally included in the employee’s income.”

It also said the value of the benefit is “equal to the fair-market value of the merchandise purchased, less the amount paid by the employee.”

However, the updated document noted that no amount will be included in the employee’s income if the discount is also available to the general public or to specific public groups.

Karl Littler, vice president of public affairs for the Retail Council of Canada, also welcomed the government’s decision to remove the change.

“Obviously, that’s a pretty positive development from our perspective,” Littler said in an interview. “It does seem to us that there’s some kind of assertion of political oversight over the file at this point at the ministerial level.”